The Day of the Black Sea

You got to hand it to Chris Graythen of Getty — he sure can make an oil spill look beautiful. Actually, there are a lot of great photos being taken in the Gulf of Mexico right now. See here, here, here and here. I am not being callous, but you simply can’t turn your eyes away from these photos.

(Following is an opinion piece. Skip it if you are sensitive).

So this morning, U.S. Attorney General’s office opened a criminal case towards BP. I know BP is primarily responsible for the oil spill, but the case was nothing but making cheap political capital out of this tragedy. Yes, the case will be hideously popular, obscenely popular with the voters in the U.S. (say what you may about the administration in Washington, you can’t deny it is very shrewd, and its eyes were fully set on November elections).

Fingerpointing is all the rage in Washington it seems. In singling out BP with this criminal case, the administration blithely ignored the responsibilities and negligences on part of TransOcean, Halliburton, the White Houses (past and present), government agencies, local and state governments and the Congress. Eventually, the blame lies squarely on our doorsteps — our insatiable addiction to oil caused this crisis. Full Stop.

Knowing this, it is impossible to take a moral high ground; actually, despite this accident, the oil extraction is relatively less risky compared to other big scale enterprises like construction, Wall Street or NASA. There are always capsizing and pipeline bursts here and there, but the last time spills of this scale happened were in 1979 and 1990. Considering the number of wells around the world and how difficult it is to get oil, this can be considered a good track record. Since risks associated with such a drilling were calculated and regulated beforehand, it is also disingenuous to apply a law retroactively to make a business more liable (BP should be recommended here for taking full responsibility).

So where do we go from here? Well, we don’t go anywhere, but if you have enough money and are willing to take a risk, it is time to short BP. BP now risks being a target of a takeover (or at least a receivership) from the U.S. government. Taking the world’s third largest company out of private sector will have severe negative impact on a fragile economy. Only by shorting BP, pension and mutual funds will recover their investments. So buy BP shares, arrange some default swaps, and bet on them to fail. For a safer measure, bet on FTSE and Dow Jones to go down too. If you aren’t doing it, a lot of hedge funders are doing it anyway (BP lost $12 billion this morning alone).

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